An allocation of 7.9 billion euros is already prepared with the help of the IMF. To this is added the one promised by the World Bank and the Asian Development Bank. The “guarantees” of the main creditors, including China and India. But it is precisely some investments from Beijing that have sunk the island.
Colombo () – Backed by the imminent rescue package from the International Monetary Fund (IMF) scheduled for March, the Sri Lankan government is ready to increase its foreign exchange reserves by some 7.9 billion euros. Colombo intends to implement an ambitious plan, relying on the 2,700 million promised by the IMF, financial aid from the World Bank, the Asian Development Bank package and through the restructuring of some state companies. According to experts, the foreign exchange reserve will begin to strengthen with the first tranches scheduled for the next two weeks.
A senior official at the Central Bank of Sri Lanka consulted by confirmed the guarantees that the country received in financial matters from the “main creditors”, including China and India, thus laying the foundations “for the final approval” of IMF aid. In a note, the international organization confirmed that the approval of the agreement reached on September 1, 2022 is expected on March 20.
On March 7, President Ranil Wickremesinghe informed Parliament that there are “indications” that the economy “is improving”, although foreign exchange reserves remain “insufficient” for “imports” of “essential” goods. The IMF plan is crucial because, in this way, other creditors could start to provide additional funds.
Economists Dilan Senanayake and Sujith Gamage broke down the figures: the country gets just under 12 billion euros from exports, another 6.5 billion from remittances from migrant workers and another 3.7 billion from tourism, for a total of about 21,500. millions of euros. Spending on imports is around 20,500 million. “The balance,” they added, “could serve to pave the way for prudent daily cash flow management, followed by a rapid recovery of the economy.”
Sri Lanka has long benefited from economic growth based on long-term loans, especially from China, which remains one of its main creditors. However, the development model adopted by Beijing for the island nation – which included large projects in the hands of a few companies at a higher interest rate and confidentiality agreements on these investments – proved problematic.
Political scientists Chaminda Bandara and Randesh Wijewardena confirmed that “currently” Colombo is facing the “worst” economic crisis since independence, with “shortages” of food and fuel, “but China turned a blind eye to the crisis”, blaming the debtors. For example: the Hambantota port project, which was developed with significant Chinese funding, was not commercially viable and poses a geostrategic threat to the Indian Ocean region. There are other similar projects for which Colombo has to pay huge debts.
Finally, the uncomfortable Chinese presence would also have encouraged the spread of corruption and indebtedness that has become endemic, making the island hostage to investments from Beijing that aggravated “the structural weaknesses of the economy and contributed to the current crisis.” “.